Pound Canadian Dollar (GBP/CAD) Exchange Rate Dives as BoC Ends Asset Purchases

The Pound Canadian Dollar (GBP/CAD) exchange rate initially rose as talks proceeded between UK Brexit Minister David Frost and the EU’s Maroš Šefčovič.

Dovish messaging from the Bank of England (BoE) then capped Sterling gains, although the Pound (GBP) was buoyed by positive Covid news.

Midweek, the Canadian Dollar (CAD) gained as the Bank of Canada (BoC) revealed its plans to end quantitative easing: falling oil prices subsequently dented CAD prospects.

What’s Been Happening: CAD Buoyed by BoC Decision, UK Markets Digest Budget

On Tuesday, Sterling gained against the Canadian Dollar despite dovish BoE comments.

A sharp fall in Covid-19 infections was revealed; CBI Distributive Trades also printed above expectations.

On Wednesday, the BoC announced it would end quantitative easing and move into reinvestment. Policymakers said borrowing costs would remain stable until the ‘middle quarters’ rather than the ‘second half’ of 2022, causing GBP/CAD to plummet.

The Canadian Dollar dipped on Thursday as the price of WTI crude oil hit a two-week low; the Pound wavered as investors digested Rishi Sunak’s autumn budget.

On Friday, the ‘Loonie’ rose as Canadian GDP revealed growth in fifteen of twenty sectors. Pound trading remained subdued over the UK-France fishing dispute.

Into this week, the Pound Canadian Dollar exchange rate is range-bound as BoE rate hike hopes lift Sterling and CAD is bolstered by a better-than-expected manufacturing PMI.

Three Things to Watch Out for This Week

  1. BoE Interest Rate Decision

The Bank of England will reveal its latest decision on Thursday, alongside fresh forward guidance.

  1. Canadian Balance of Trade

Canada’s latest trade balance is expected to reveal a surplus of C$1.55bn.

  1. Ivey PMI

Friday’s Ivey PMI is forecast to drop to 65 from last month’s 70.4 – still a positive result.

Pound Canadian Dollar Forecast

In the second half of this week, GBP/CAD is likely to be influenced by the BoE’s interest rate decision, alongside the Canadian trade balance and a speech from the BoE’s Jon Cunliffe.

Canadian employment data on Friday may influence CAD rates, followed by the Ivey PMI. Meanwhile, speeches by two BoE policymakers may impact upon Pound dynamics.

Olivia Evershed

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